Interest rates need to rocket stated economist
Many consumers in the UK have been hit hard with rising interest rates over the past year, with rates shooting up from 4.5% to 5.25% after the Bank of England raised rates three times between last August and this January. The Bank of England announced earlier this week that there would be no interest rate rise in April, but many experts think that the decision from the Monetary Policy Committee was a tight one and that the hold off on the interest rate rise is simply a temporary one that will instead go ahead in May, even if only by another 0.25%, taking the rate to 5.5%.
However, one leading economist has said that with property prices in the UK rocketing as they are, the Bank of England needs to look at increasing the interest rate considerably in order to stabilise these rising values rather than just adding quarter of a percent here and there. The economist, National Institute of Economic and Social Research – which advises the treasury and the Bank of England – is Martin Weale, and he claims that interest rates may need to rise to eight or even ten percent in order to control rising property values.
According to Weale: 'Ten percent might bring the boom under control, or possibly eight percent would be enough to do it. But a quarter-point here or there is not going to do it.' This sort of interest rate rise could see the monthly repayments on a mortgage of £150,000 shoot up by several hundred pounds. Homeowners with variable rate mortgage loans have already had to deal with rising repayments following the recent three interest rate hikes.
However, according to Weale the property market bubble could burst and leave many of homeowners in serious trouble if interest rates aren't hiked up by a considerable amount.
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